Walmart and the Sustainability Index: One Year Later
It’s been exactly a year since Walmart’s historic launch of a Sustainability Index and other measures to assess suppliers and products and, remarkably, the sun still rises in the East and sets in the West.
As I stated in my analysis that day -- July 16, 2009 -- “There is both more and less going on here than meets the eye.” One year later, I’m sticking to that story.
A brief review: Last summer, Walmart announced that it would assess its suppliers on environmental and social criteria. It announced a Sustainable Product Index to “establish a single source of data for evaluating the sustainability of products,” the company said.
Walmart said it would introduce the initiative in three phases, beginning with a survey of its more than 100,000 suppliers around the world. The survey includes 15 questions that “serve as a tool for Walmart’s suppliers to evaluate their own sustainability efforts.”
Second, Walmart helped launch the Sustainability Consortium, a group of universities “that will collaborate with suppliers, retailers, NGOs and government to develop a global database of information on the life cycle of products -- from raw materials to disposal.” Walmart provided the initial funding and invited others to join in.
Finally, Walmart said it hopes to translate the Consortium’s data into a simple rating for consumers about the sustainability of products -- the ultimate dream of green-minded shoppers.
It was, as my colleague Marc Gunther described it at the time, “an ambitious, comprehensive, and fiendishly complex plan to measure the sustainability of every product it sells.”
So, where are we today?
Green Dreams Die Hard
Walmart’s sustainability dreams don’t appear to have diminished, though I’m pretty sure the company has been humbled by the fiendish complexity of it all. Having watched this unfold and having spoken with those inside Walmart, the Consortium, and several of its major suppliers, it seems clear that the reality of a comprehensive and simple rating of products and companies remains elusive.
But that’s not the sum total of the story.
First, the good news. Walmart has fundamentally changed the conversation about products and sustainability in general, and about the environmental impacts of supply chains in particular. It has shifted the notion of green consumerism from the margins to the mainstream -- from a relatively elite group of relatively upscale shoppers to the mass market that Walmart serves. The mission of the Consortium -- to “work collaboratively to build a scientific foundation that drives innovation to improve consumer product sustainability through all stages of a product's life cycle” -- has revived the science of life cycle analysis, or LCA, the process of assessing and measuring products’ cradle-to-grave impacts. LCA, which has been around for nearly half a century, has enjoyed a renaissance that can be traced to the launch of the Consortium, which views LCA and its variants as principal tools of its trade.
Similarly, Walmart’s move has enlivened the conversation around supply-chain environmental management, the practice of pressing manufacturers to reduce the waste, toxicity, and resource intensity of their products -- in effect, to ship fewer environmental problems to their customers. There’s not a single business conference, green or otherwise, I’ve attended or spoken at over the past year in which Walmart hasn’t been a topic of conversation, whether on stage or in the hallways. Walmart is by no means the first or only company to press suppliers to reduce their environmental impacts, but its aggressive, highly visible efforts have gotten the attention of companies and sectors that thought they might somehow be unaffected.
But, as I said, the complexity of assessing companies and products has befuddled Walmart and the Consortium, and has engendered resistance and pushback by some leading suppliers, even a few of the roughly 50 members that have joined the Consortium. Simply put, the reality isn’t living up to the launch-day hype.
The Fate of the Fifteen Questions
Let’s start with assessing companies. The 15 questions that comprise Walmart’s Supplier Sustainability Assessment Tool were superficial at best, voluntary in nature, and the answers are largely yes-or-no, self-reported, and unverified. (“Responses to this questionnaire will be accepted in good faith, relying on the integrity of the supplier,” the company stated in an FAQ [download - PDF]. “Violation of that good faith will be considered very serious by Walmart.”)
What, exactly, is happening to the submitted answers? Not much, so far as I can tell. Walmart says it is using the answers to better understand suppliers, but it is not creating ratings, rankings, or other comparative measures, even for internal use. To my knowledge, not a single supplier has been dropped because of its answers, or lack thereof, to the questionnaire. There is no evidence that supplier responses have led any of Walmart’s buyers to alter their purchasing practices. Whatever Walmart is doing with the information submitted by suppliers, it is doing privately. For all of Walmart’s stated intentions about “helping create a more transparent supply chain,” any assessment of company performance it has done to date has been inside a black box.
The product-level scrutiny has been equally slow-going. Predictably, there’s a certain amount of jockeying going on by Consortium members to ensure their interests are being addressed -- for example, that the metrics used to judge products favor their companies. There’s a sense of frustration among some members that the Consortium, run by academics from the University of Arkansas and Arizona State University, lacks the management skills to herd all of the corporate cats.
To be sure, the Consortium began its life with seemingly unfathomable marching orders: to create a means for determining which of the hundreds of thousands of products Walmart and other retailers sell are green -- or at least greener. Since Walmart sells just about every conceivable product short of replacement human organs and body parts (so far as I know), this is a man-on-the-moon-caliber undertaking.
The Consortium's Ambitions
This is not to say that the Consortium isn’t engaged (though I truly wish its online news page contained more than superficial press releases announcing the companies that have joined). The group has an ambitious agenda, and has created a series of working groups that aim to create a common set of Sustainability Measurement and Reporting Standards for various sectors and product categories. It also plans to develop an online “Sustainability Information Hub” containing a library of such standards, as well as “baseline models, sustainability performance drivers, database resources, use phase and end-of-life scenarios” and other information supporting the Consortium’s activities. And it is developing an “IT backbone” -- online tools that will let companies create “a federated set of data pools and standards used to securely exchange static company specific product information between organizations in supply chains.” Some of these are slated to roll out this fall. All of these are intended to build much-needed capacity.
On its website, the Consortium states that its purpose is to convene key stakeholders, research products’ life-cycle impacts, identify “key improvement opportunities,” identify gaps in data about products’ impacts, and model and promote “new technologies and consumer behavior.”
Note the absence of anything here about a Sustainability Index. The Consortium clearly states: “We are not developing an index,” adding: “While the outputs of our efforts could be used by others to develop an index, it is not the intent of the Consortium to develop one.”
So, where is the Sustainability Index? It doesn’t seem to be on anyone's agenda. So much for the breathless hype last summer about how Walmart would transform the marketplace. As one blogger put it at the time:
The program could, essentially, force ungreen products off the market before a label even has a chance to discourage a consumer from buying it -- if Walmart continues to be inclined to support products with lower environmental impacts.
That's not in the works -- or, if it is, no one is talking about it.
Finally, it’s important to point out that the word “sustainability” in Walmart’s and the Consortium’s work is misleading, in that this remains largely an environmental exercise, with little heed paid to sustainability’s social aspects. True, both organizations give lip service to things like employee working conditions, human rights, and community impacts, but little of this is being manifest in these organizations’ work.
I’ll conclude where I started a year ago: This is both more and less than meets the eye. Walmart continues to deserve credit for its commitment and audacious goals, and for the ripples it has created. And, to be fair, no one expected miracles in just twelve months.
But Walmart and its suppliers and partners have unwittingly demonstrated how hard all of this is -- that even the world’s biggest retailer has a limited set of tools when it comes to moving the marketplace towards greener goods, more responsible suppliers, and more conscientious customers.
Joel Makower is executive editor of GreenBiz.com.